UPDATE 1-Malaysia's PM eases rules on foreign fund managers, corporate bonds

Mon Jun 9, 2014 12:24am EDT

Related Topics

* Foreign fund managers get broad access to retail investors

* Requirement for corporate-bond ratings to end in 2017

* Foreign rating agencies to be allowed to operate

* Najib says liberalization steps in line with development goals (Recasts, adds details, fund manager quote)

By Yantoultra Ngui and Stuart Grudgings

KUALA LUMPUR, June 9 (Reuters) - Malaysia's Prime Minister Najib Razak announced steps to liberalize the country's financial sector on Monday, removing barriers faced by foreign-owned fund managers and easing ratings requirements for the corporate bond market.

Najib, speaking at an investment conference in Kuala Lumpur, said the moves were aimed at boosting investment and encouraging a "stable and inclusive" financial system as the country aims to reach developed nation status by 2020.

He said foreign firms will be allowed, effective immediately, to fully own unit-trust management companies in Malaysia - a move market players said would give foreign fund managers much broader access to the country's retail investors.

"There will be no barrier to entry for new foreign unit-trust management companies coming into Malaysia," Najib said.

He also announced that beginning in 2017, it will no longer be mandatory for Malaysian companies to get credit ratings on corporate bonds they issue.

"This will broaden the corporate bond market, and enable investors to further diversify their portfolios," Najib said.

In addition, Najib said that international credit rating agencies with full foreign ownership would be allowed to operate in the Malaysian market from January 2017.

Removal of the mandatory requirement for corporate bond credit ratings is expected to stimulate more issuance in the bond market, said Yeah Kim Leng, dean of the business school at Malaysia University of Science and Technology.

"The move is a signal that the capital market in Malaysia has reached a maturity stage where bond investors are sophisticated enough to make their own investment assessment and decisions (rather) than relying on the corporate rating agencies," he said.

'A MASSIVE STEP'

The removal of restrictions on foreign-owned fund managers means they will now be able to market funds to retail investors in the Southeast Asian nation of 29 million people, said Gerald Ambrose, a fund manager at Aberdeen Asset Management in Kuala Lumpur.

Until now, they have only been able to sell wholesale funds to Malaysians with a net worth of more than 3 million ringgit ($935,000)

"Foreign fund managers can manage conventional unit trusts now, which is a massive step. We've been pushing for that for a long time," Ambrose said.

Najib said the new steps were integral to Malaysia's goal of developing its economy to achieve developed-world status by 2020, with a projected income per head of $15,000.

"I want to see Malaysia emerge not just with a high-income economy, but a high-quality economy," he said.

"That means building a stable and inclusive financial system, encouraging innovation, and tackling corruption. To that end, we have introduced policies and reforms to ensure our growth is not just strong, but sustainable." (Editing by Richard Borsuk)

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